Question 1

According to the marginal-cost-marginal-benefit rule:

Accepted Answer

A)   only government projects (as opposed to private projects) should be assessed by comparing marginal costs and marginal benefits.
B)   the optimal project size is the one for which MB = MC.
C)   the optimal project size is the one for which MB exceeds MC by the greatest amount.
D)   project managers should attempt to minimize both MB and MC.E) C) and D)
F) A) and B)

Question 2

Allocative efficiency occurs where (for the last unit)maximum willingness to pay exceeds minimum acceptable price by the greatest amount.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements is not true?

Accepted Answer

A)   Some public goods are paid for by private philanthropy.
B)   Private provision of public goods is usually unprofitable.
C)   The free-rider problem results from the characteristics of nonrivalry and nonexcludability.
D)   Public goods are only provided by government.E) A) and C)
F) C) and D)

Question 4

Which of the following is an example of a public good?

Accepted Answer

A)   A weather warning system.
B)   A television set.
C)   A sofa.
D)   A bottle of soda.E) B) and D)
F) C) and D)

Question 5

(Last Word) Because there are so many sources of carbon dioxide,making monitoring difficult and costly,many economists:

Accepted Answer

A)   prefer a carbon tax to cap-and-trade for reducing carbon dioxide emissions.
B)   prefer cap-and-trade to a carbon tax for reducing carbon dioxide emissions.
C)   believe that cap-and-trade and a carbon tax are both costly but should be implemented to reduce carbon dioxide emissions.
D)   believe that neither cap-and-trade nor carbon taxes can effectively reduce carbon dioxide emissions.E) All of the above
F) B) and D)

Question 6

From society's perspective,in the presence of a supply-side market failure,the last unit of a good produced typically:

Accepted Answer

A)   generates more of a benefit than it costs to produce.
B)   produces a benefit exactly equal to the cost of producing the last unit.
C)   maximizes the net benefit to society.
D)   costs more to produce than it provides in benefits.E) A) and B)
F) A) and C)

Question 7

Which of the following conditions does not need to occur for a market to achieve allocative efficiency?

Accepted Answer

A)   Consumers' maximum willingness to pay equals producers' minimum acceptable price for the last unit of output.
B)   The sum of producer and consumer surplus is maximized.
C)   The total revenue received by producers equals the total cost of production.
D)   The marginal benefit of the last unit produced equals the marginal cost of producing that unit.E) A) and B)
F) B) and D)

Question 8

(Last Word) In a cap-and-trade program:

Accepted Answer

A)   government fixes the price of pollution rights and firms choose how many permits to purchase.
B)   government fixes the maximum amount of a pollutant that firms can discharge and issues permits that firms can buy from and sell to each other.
C)   each firm is provided a fixed number of permits for a particular pollutant and no individual firm is allowed to acquire additional permits.
D)   firms can emit whatever type of pollutant they want,so long as the total tonnage does not exceed a government-established quantity.E) A) and C)
F) C) and D)

Question 9

(Consider This) Suppose that a new band,"Balin and the Wolf Riders," tries to sell its music on the internet.Economists would expect:

Accepted Answer

A)   all of those enjoying the music to pay for downloads and compensate the band for its costs.
B)   some of those enjoying the music to "free ride" through illegal file sharing and digital piracy.
C)   government to tax those attempting to download the band's music.
D)   there to be no consumer surplus for those who download the band's music.E) A) and B)
F) All of the above

Question 10

If the demand curve reflects consumers' full willingness to pay,and the supply curve reflects all costs of production,then which of the following is true?

Accepted Answer

A)   The benefit surpluses shared between consumers and producers will be maximized.
B)   The benefit surpluses received by consumers and producers will be equal.
C)   There will be no consumer or producer surplus.
D)   Consumer surplus will be maximized,and producer surplus will be minimized.E) None of the above
F) All of the above

Question 11

Consumer surplus:

Accepted Answer

A)   is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price.
B)   the difference between the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept.
C)   the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price.
D)   rises as equilibrium price rises.E) C) and D)
F) B) and D)

Question 12

Nonexcludability describes a condition where:

Accepted Answer

A)   one person's consumption of a good does not prevent consumption of the good by others.
B)   there is no effective way to keep people from using a good once it comes into being.
C)   sellers can withhold the benefits of a good from those unwilling to pay for it.
D)   there is no potential for free-riding behavior.E) A) and B)
F) A) and C)

Question 13

Amanda buys a ruby for $330 for which she was willing to pay $340.The minimum acceptable price to the seller,Tony,was $140.Amanda experiences:

Accepted Answer

A)   a consumer surplus of $10 and Tony experiences a producer surplus of $190.
B)   a producer surplus of $200 and Tony experiences a consumer surplus of $10.
C)   a consumer surplus of $670 and Tony experiences a producer surplus of $200.
D)   a producer surplus of $10 and Tony experiences a consumer surplus of $190.E) A) and B)
F) All of the above

Question 14

An improvement in the technology of pollution control is likely to increase society's optimal amount of pollution abatement.

Accepted Answer

A) True 
 B)False

Question 15

Producer surplus:

Accepted Answer

A)   is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price.
B)   rises as equilibrium price falls.
C)   is the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price.
D)   is the difference between the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept.E) A) and B)
F) A) and D)

Question 16

Asymmetric information always results in adverse selection.

Accepted Answer

A) True 
 B)False

Question 17

Suppose that the Anytown city government asks private citizens to donate money to support the town's annual holiday lighting display.Assuming that the citizens of Anytown enjoy the lighting display,the request for donations suggests that:

Accepted Answer

A)   the display creates negative externalities.
B)   government should tax the producers of holiday lighting.
C)   resources are currently overallocated to the provision of holiday lighting in Anytown.
D)   resources are currently underallocated to the provision of holiday lighting in Anytown.E) A) and B)
F) A) and C)

Exam 4: Market Failures: Public Goods and Externalities

(Last Word) Because there are so many sources of carbon dioxide,making monitoring difficult and costly,many economists:

Correct Answer
verified

Suppose that the Anytown city government asks private citizens to donate money to support the town's annual holiday lighting display.Assuming that the citizens of Anytown enjoy the lighting display,the request for donations suggests that:

Correct Answer
verified

(Last Word) In a cap-and-trade program:

Correct Answer
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Which of the following conditions does not need to occur for a market to achieve allocative efficiency?

Correct Answer
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Producer surplus:

Correct Answer
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From society's perspective,in the presence of a supply-side market failure,the last unit of a good produced typically:

Correct Answer
verified

According to the marginal-cost-marginal-benefit rule:

Correct Answer
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Consumer surplus:

Correct Answer
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If the demand curve reflects consumers' full willingness to pay,and the supply curve reflects all costs of production,then which of the following is true?

Correct Answer
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Amanda buys a ruby for $330 for which she was willing to pay $340.The minimum acceptable price to the seller,Tony,was $140.Amanda experiences:

Correct Answer
verified

Asymmetric information always results in adverse selection.

Correct Answer
verified

Nonexcludability describes a condition where:

Correct Answer
verified

An improvement in the technology of pollution control is likely to increase society's optimal amount of pollution abatement.

Correct Answer
verified

Which of the following statements is not true?

Correct Answer
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Which of the following is an example of a public good?

Correct Answer
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(Consider This) Suppose that a new band,"Balin and the Wolf Riders," tries to sell its music on the internet.Economists would expect:

Correct Answer
verified

Allocative efficiency occurs where (for the last unit)maximum willingness to pay exceeds minimum acceptable price by the greatest amount.

Correct Answer
verified

Exam 4: Market Failures: Public Goods and Externalities

(Last Word) Because there are so many sources of carbon dioxide,making monitoring difficult and costly,many economists:

Correct AnswerverifiedShow Answer

Suppose that the Anytown city government asks private citizens to donate money to support the town's annual holiday lighting display.Assuming that the citizens of Anytown enjoy the lighting display,the request for donations suggests that:

Correct AnswerverifiedShow Answer

(Last Word) In a cap-and-trade program:

Correct AnswerverifiedShow Answer

Which of the following conditions does not need to occur for a market to achieve allocative efficiency?

Correct AnswerverifiedShow Answer

Producer surplus:

Correct AnswerverifiedShow Answer

From society's perspective,in the presence of a supply-side market failure,the last unit of a good produced typically:

Correct AnswerverifiedShow Answer

According to the marginal-cost-marginal-benefit rule:

Correct AnswerverifiedShow Answer

Consumer surplus:

Correct AnswerverifiedShow Answer

If the demand curve reflects consumers' full willingness to pay,and the supply curve reflects all costs of production,then which of the following is true?

Correct AnswerverifiedShow Answer

Amanda buys a ruby for $330 for which she was willing to pay $340.The minimum acceptable price to the seller,Tony,was $140.Amanda experiences:

Correct AnswerverifiedShow Answer

Asymmetric information always results in adverse selection.

Correct AnswerverifiedShow Answer

Nonexcludability describes a condition where:

Correct AnswerverifiedShow Answer

An improvement in the technology of pollution control is likely to increase society's optimal amount of pollution abatement.

Correct AnswerverifiedShow Answer

Which of the following statements is not true?

Correct AnswerverifiedShow Answer

Which of the following is an example of a public good?

Correct AnswerverifiedShow Answer

(Consider This) Suppose that a new band,"Balin and the Wolf Riders," tries to sell its music on the internet.Economists would expect:

Correct AnswerverifiedShow Answer

Allocative efficiency occurs where (for the last unit)maximum willingness to pay exceeds minimum acceptable price by the greatest amount.

Correct AnswerverifiedShow Answer

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